Thoughts on business school, economics, NC State, and everyday life from an economist at NC State's business school

Friday, November 6, 2009

When will the Fed start raising interest rates?

We will be talking about the Fed in MBA 505 this coming week. The big question right now, according to this recent WSJ article, concerns when will the Fed start raising interest rates. The fed will be looking at GDP, unemployment and inflation signals. Before raising rates, the Fed is likely to send out signals weeks, if not months, in advance. Next year's midterm Congressional elections will not make the Fed's job any easier. It is quite possible that the Fed will need to raise rates some time in 2010 to defend the value of the dollar and send a strong signal about its commitment to fight inflation even though unemployment is likely to be 8-9 percent when the rates start going up. Congress may choose to challenge the Fed's independence in such a situation.

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About Me

Steve Allen is Associate Dean for Graduate Programs and Research in the College of Management at NC State University. He has appointments in the Department of Economics as well as the Department of Management, Innovation, and Entrepreneurship. Steve also is a Research Associate of the National Bureau of Economic Research, a non-profit research organization located in Cambridge, Mass.